“d.light” Executive Case: USA
“d.light” Executive Case: USA
d.light’s founding inspiration came in 2004 when co-founder Sam Goldman was serving in the Peace Corps in Benin (West Africa) and a neighbour’s child was badly burned in a kerosene fire. Sam met Ned Tozun and other co-founders on the “Design For Extreme Affordability” programme run by Stanford Business School and Design School. He graduated in 2007, having won a prestigious business plan competition sponsored by venture capital firm Draper Fisher Jurveston – along with US$ 250,000 in seed funding. The founders moved to India and China, and in 2008 pioneered a unique combination of the latest in solar panel, LED and battery technology in a well-designed, extremely affordable product form. Donn Tice, who had been an adviser and board member since 2008 and Chairman since 2010, stepped in as CEO in 2011 and recruited an experienced local (in-market) executive team, developing new approaches to distribution and the supply chain that have combined to create rapid growth from 2,000 retail outlets and 3 million customers served to over 10,000 retail outlets and over 15 million customers, a compound sales growth rate of over 100% and a market share exceeding 50%.
Goldman’s neighbour’s child burned in kerosene fire.
Goldman and Tozun wins US$ 250,000 DFJ Competition; company incorporated.
First affordable solar powered LED lantern creates new consumer market.
1 million customers, 10 countries, 500 retail outlets, 30 employees.
d.light named 100th object in “A History of the World in 100 Objects”.
Senior executive team assembled, led by Tice as CEO.
Third product, 3 million customers, 30 countries, 2,000 retail outlets, 60 employees.
Pay-as-you-go home systems introduced.
10 million customers, 40 countries, 5,000 retail outlets, 100 employees.
d.light wins Zayed Future Energy Prize.
15 million customers, 50 countries, 10,000 retail outlets, 200 employees.
Compound growth rate exceeds 100%, market share exceeds 50%.
Sam Goldman, Chief Customer Officer, co-founded d.light in 2007 and served as the company’s founding CEO. During his tenure as CEO, he raised over US$ 11 million in funding, started the India sales and marketing division, and oversaw multiple launches of products, including the award-winning S250 and S10. Goldman has been selected as an Ashoka Fellow and World Economic Forum Young Global Leader; he was also recognized by Forbes as one of the world’s top 30 social entrepreneurs. Prior to d.light, he founded and managed multiple ventures in Africa, including improved agriculture and construction businesses, and a for-profit NGO cultivating the miracle tree Moringa oleifera and distributing low-cost latrines, cooking stoves and rain water catchment cisterns. Goldman has lived in Cameroon, Mauritania, Pakistan, Peru, India, Rwanda, Canada, Hong Kong SAR and the United States. After graduating with degrees in Biology and Environmental Studies from the University of Victoria, Canada, he earned an MBA from Stanford.
Ned Tozun, President, co-founded d.light in 2007 and has served as its President since then. Tozun partnered with Goldman to secure private investment for the company, built up the manufacturing operations and oversaw the expansion of distribution into over 40 countries. Tozun has been recognized by Forbes as one of the world’s top 30 social entrepreneurs and was selected as an Asia 21 Young Leader by the Asia Society. Prior to d.light, Tozun founded several consumer product start-ups in Silicon Valley. His most recent position was as CEO and founder of a media technology company, where he designed and patented technology used to develop several products launched in the mobile content and specialty gift markets in the United States, Europe and Japan. Tozun graduated from Stanford with degrees in Computer Science and Earth Systems, and returned to Stanford to earn his MBA.
Donn Tice, Chairman and CEO, has been a d.light adviser since March 2008, a director since November 2008 and Chairman since 2010. He brings 30 years of experience in consumer products, clean technology and global distribution. He has built global businesses worth US$ 100+ million and raised US$ 100 million in capital. Tice’s passion for “base-of-the-pyramid consumers” began as a United Nations Fellow, when he was mentored by the late C.K. Prahalad. As founder of Sustainable Solutions (2006-2010), Tice accelerated consumer venture, capital-backed portfolio companies. While CEO of start-up Nano-Tex (2003-2006), his team expanded distribution to 90 brands in 30 countries through 100 distribution partners, creating a 25 times valuation increase. As CEO of Winterland (1997–2002), Tice grew sales 3.5 times, from US$ 30 million to US$ 110 million.
Q1: What was the source of the initial idea, and how did that idea evolve into a viable growing company? How did it change over time?
Goldman: “As a Peace Corps volunteer in Benin, West Africa in 2004, a neighbour’s 15-year-old child was badly burned in a kerosene fire. I knew this happened thousands of times every year and realized in that moment that ‘there had to be a better way’ and resolved then to make a difference. Researching this at Stanford with co-founders Ned Tozun, Xianyi-Wu, Gabe Risk and Erica Estrada, we had the insight that the latest LED, solar panel and battery technology could be combined to deliver safe, bright light and power far more affordably. If we could do this, it would create the opportunity to reach a vast market of over 2 billion people who don’t have access to reliable, affordable power in the much larger base-of-the-pyramid consumer market.”
Tozun: “Early support from angel investors enabled us to win a prestigious US$ 250,000 Draper Fisher Jurvetson business plan competition, which launched the company and catalyzed series A funding with an ideal mix of venture capital and ‘patient capital’ impact investors.”
Q2: What were the major growth accelerators for your company in the early years of high growth?
Goldman: “Understanding our customers’ wants and needs and reflecting their priorities in our products have always been key to our success. Living in our markets and regularly spending time in our customers’ homes and businesses has been irreplaceable. Shortly after founding the company, I moved to India to commence market development, and Ned moved to China to develop our product supply chain.”
Tozun: “We decided from the start to create a global company; designing our business to be global and large scale has made an enormous difference. This focus on a global, scalable business has been reflected in everything we do, including product design and the choice of partners in every area from investors to the product supply chain and distribution. It extends to accounting and legal professionals.”
Tice: “A pivotal change in 2011 was recruiting a team of senior executives with over 20 years of local, in-country experience, in every key area – general management, product design, production, sales, marketing and finance. In less than 18 months, we were able to introduce new products, raise industry quality standards several times and introduce innovative solutions to the decades-old problem of getting innovative products the ‘last mile’ to reach bottom-of-the-pyramid’ customers. This combination quickly produced 5 times growth in retail outlets and customers served, and set us on our current path to continued rapid acceleration.
Q3: What role did key aspects of the entrepreneurial ecosystem surrounding your company play in the growth of your company?
Tozun: “An entirely new group of ‘social impact investors’ emerged in response to our focus on deploying for-profit, private sector approaches to solve poverty and economic development problems in the developing world. The early leaders in impact investing – Gray Ghost Ventures, the Acumen Fund and the Omidyar Network – were among d.light’s early investors. Established venture capital firms like Nexus and Draper Fisher Jurvetson were attracted to these innovative models. Catalytic philanthropic and grant capital was deployed in certain high-risk or long time frame areas of market formation. The emergence of a ‘new generation’ of young professionals who want to express their values through their work has created a dynamic pool of educated, talented professionals. d.light is packed with skilled, passionate people attracted by the chance to work with a high calibre team of committed professionals making a transformative difference in our customers’ lives – and to create an entirely new market.”
Q4: What key aspects of the entrepreneurial ecosystem surrounding your company that were absent (or existed only in a weak form) created the greatest challenges for growing your company? Please describe and discuss how you met/were impacted by these gaps in the ecosystem and their resultant challenges?
Tice: “Market demand for products like ours is vast and growing rapidly but because our products are new and unlike anything else available there are no established, efficient channels of distribution for which products like ours are ‘core business’ or even familiar. Although there are informal and some formally organized networks that reach them, consumers in rural villages are notoriously difficult and costly to reach. Compounding market barriers, many developing world governments continue to subsidize low quality, unhealthy and environmentally damaging fossil fuels that power kerosene lanterns and diesel generators, while many also erect trade barriers against renewables like solar power that threaten entrenched energy interests.”
Tozun: “The ecosystem for impact investment and social enterprise didn’t exist in China when we started out, making it incredibly challenging to hire talent and strike up relationships with vendors and manufacturers. The focus was business, 100%. There was confusion in the Chinese marketplace about the concept of a for-profit social enterprise (perhaps ‘social’ was code for ‘non-profit’ or ‘unprofitable’) and initial disbelief about the ability of a company to ‘do well by doing good’.”
Q5: At what stage did you invest significant resources seeking to grow your company internationally/beyond your domestic country or region? What factors were pivotal in deciding when to seek growth internationally and where to seek that growth?
Goldman: “We invested to be a global company from the very beginning. We left California for India and China within six months of raising capital.”
Tice: “Two major pivot points were the 2009 decision to expand to Africa – by acquiring a local distributor – followed in 2011 by recruiting an experienced, globally dispersed executive team in China, Africa, India and more recently in Latin America.”
Q6: What were the biggest challenges in building growth internationally? How did you meet or adapt to those challenges?
Goldman: “We quickly learned that you simply can’t export the entrepreneurial, risk-taking culture of the US to India, China and Africa. In these markets, talented people working for multinational corporations are more risk averse, and less motivated by equity. Convincing the best people to join a start-up at a lower salary but greater ‘upside’ was very difficult, but without the best people, we were unlikely to be able to overcome the obstacles needed to create an entirely new market. We had to adapt to local demands to attract and retain exceptional local teams. We also underestimated the importance of continuous, local engagement. In our markets, partnership and joint effort with locals is essential. Every market is totally different, so you really need local knowledge to succeed.”
Tozun: “In the early days, to preserve capital, we chose not to hire senior, local management – we did everything ourselves, and travelled almost non-stop to develop new markets. We achieved early success, but it was only after we recruited experienced, local management who were continuously engaged with local partners in our markets that we could begin to scale rapidly.”
Tice: “It’s very difficult to convey just how completely global our business is, and the scope of the challenge that creates for everyone. We serve customers in almost every time zone. It is monumentally more difficult to inspire, align and support a leadership team and rapidly growing staff spread across over half a dozen time zones in extremely diverse cultural contexts. You can’t simply walk down the hall for a senior staff meeting at HQ. It takes considerable investment and continuous focus to stay connected to each other and to build a team – and a culture of teamwork and collaboration. Almost every important topic, issue, problem or decision requires communication and collaboration across multiple time zones and offices. Quarterly or more frequent face-to-face executive team meetings mean several people travel at least 12 hours just to be together; monthly calls mean several people are up at 5 am or midnight. You can’t build a consistent company culture in a global team by phone or e-mail: being truly engaged with our local leadership and staff requires over a quarter of a million miles of annual travel for me, and a very high amount for many.”
Q7: What major role, if any, did key aspects of the ecosystem in the country (or countries) you first sought international growth either promote or impede your ability to grow in those international markets?
Goldman: “It helped that some of our markets, like India, have a more developed distribution infrastructure, but creating an entirely new market still requires the establishment of new channels of distribution. The presence in many markets of subsidized fossil fuel products (kerosene and diesel) and tax or tariff barriers puts renewable energy alternatives like ours at a substantial disadvantage and continues to impede growth.”
Tozun: “In China, it helped that there is an established ecosystem of electronics manufacturing, but a very significant impediment is that readily available manufacturing and supply chains are often one of two extremes: (i) high cost, high quality; or (ii) low cost, low quality. Breakthrough innovation in the markets we chose to serve required a hard-to-develop combination of high quality at low cost.”
Q8: Seeking international growth often has both high moments and dark (low) moments. Briefly describe one high moment and one dark (low) moment in seeking international growth.
Tozun: “The lowest points have been hiring decisions that for one reason or another didn’t work out; unfortunately many of our early hires are not with us today. On the other hand, seeing our products dramatically improving millions of customers’ lives is incredibly satisfying.”
Goldman: “It’s very hard to predict sales in a completely new market. Our schools programme is a real high point: It is amazing to watch an entire generation absorb and enjoy new technology and think of it as ‘the norm’. When kids start using clean, renewable energy, they don’t go back to fossil fuels.”
Tice: “Finding ways to combine breakthrough product design with new approaches to supply chain and distribution to overcome decades-old obstacles and create an entirely new market — and then actually seeing our theories achieve real scale and impact – has been profoundly satisfying. It also continues to be a profoundly transformative experience to forge a global culture that aligns our customers’ values with those of our team and stakeholders, combining the best of our founding principles with the best of our team’s diverse experiences and perspectives, to drive a material change in one of the world’s most vexing economic development challenges – access to reliable, affordable power.”